Realtors rush for bank funding

Real estate has emerged as a hot investment destination with banks, as projects in other sectors of the economy have faltered, prompting banks to rush to fund commercial realty despite slow demand and inventory pileup.

Of the 173 projects of Rs 250 crore or more each that came for bank funding in the first half of 2013-14,53 were real estate projects that are estimated to cost nearly Rs 62,000 crore, which is almost one-fifth of the project cost. In terms of project cost, the sector lags only iron and steel, where the cost of 11 projects is around Rs 63,700 crore. But in terms of loans sanctioned so far,it tops the chart,accounting for a little under a quarter.
Funding for commercial real estate is in addition to home loans given by banks,which rose 19% to almost Rs 5,000 crore by August end, 2013 compared to August 2012.

Coming as it does in the midst of a slowdown,analysts send out a cautionary note.If real estate exposure of banks is going up,then we need to take note.The market demand seems to be slowing down and the market risk is perceived to be higher.Its a sector where there have been several ratings downgrades.But several projects are covered through lease rentals,which helps reduce the risk, said ICRA managing director Naresh Thakkar. An executive at another rating agency warned of higher risks in lending to the National Capital Region,where a bulk of the projects seeking bank funding are coming up.
Bankers and real estate consultants,however,play down the concerns.RBI has already put in several safeguards and with funding against rentals,things are much safer for banks.Besides,the sector offers them the possibility of earning a higher spread compared to telecom or pharma, said Amber Maheshwari,managing director (coroporate finance ) at Jones Lang LaSalle,a leading real estate consulting firm.Bankers believe that funding real estate is not as risky as is made out to be.The funding requirement is much lower,at around 10% of the project cost,and the disbursement will be over the next five-seven years.In addition,it helps steel,cement and employment, added Oriental Bank of Commerce CMD S L Bansal.

Maha tops investment destination

New Delhi: Maharashtra has managed to move marginally ahead of Odisha to regain the top slot among states,with Gujarat at number three.Maharashtra has been a traditional favourite with investors but has lost out in recent years to Gujarat and Odisha.But,the first half data on projects coming up in various states shows that Maharashtra is expected to attract projects worth Rs 61,500 crore,compared to Odishas Rs 57,750 crore.While the western Indian state has attracted interest across sectors,a majority of the investments going into Odisha are linked to minerals.

This entry was posted in Ghaziabad Properties, Greater Noida, Home Loan, Loan Against Property, Noida Extension, property in gurgaon, property in noida, Property Investment, Real Estate, Real Estate Development, Uncategorized. Bookmark the permalink.

One Response to Realtors rush for bank funding

  1. 3aworldasia says:

    Nice and interesting posting about info about Property in Noida

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